Barnes & Noble Gets Closer to Breakup as CEO Resigns

July 9 (Bloomberg) -- Barnes & Noble Inc. moved closer to
breaking up the largest U.S. bookstore chain after its chief
executive officer resigned and it named a manager with a history
of spinning off units to its most senior position.

William Lynch stepped down yesterday, effective
immediately, and Barnes & Noble promoted Chief Financial Officer
Michael Huseby, 57, to be president of the company and CEO of
Nook Media. It isn’t looking for a new CEO and Huseby will
report to Leonard Riggio, the chain’s chairman, founder and
largest shareholder, the New York-based company said.

Barnes & Noble is considering splitting up its businesses
after Riggio said in February that he planned to make an offer
for its 680 stores and website. The company also created a
digital-media division last year with the possible goal of
spinning it off.

“This should bring this to a head,” said John Tinker, a
New York-based analyst at Maxim Group, referring to the
company’s review. “Lynch was always the champion of the Nook
and it didn’t work,” said Tinker, who has a buy rating on the
stock.

Huseby joined Barnes & Noble in March 2012 after holding
the chief financial officer position at Cablevision Systems
Corp., where he helped spin off two divisions. He is now Barnes
& Noble’s most senior executive and the company isn’t looking
for a replacement for Lynch as it weighs options for selling and
separating its businesses, Mary Ellen Keating, a spokeswoman,
said in an interview yesterday.

Nook Media

In May, TechCrunch reported that Microsoft Corp. was
planning to make a bid for Nook Media. The shares surged 24
percent to $22.08 on May 9 after the report. Keating declined to
comment on the progress of the company’s possible breakup and
declined to make an executive available for an interview
yesterday.

The shares rose 5.4 percent to $18.61 at the close in New
York. The stock has gained 23 percent this year, compared with a
16 percent rise for the Standard & Poor’s 500 Index.

Barnes & Noble named Lynch CEO in March 2010 after he
joined the company the previous year to lead its Web unit. As
CEO, he oversaw its foray into making e-readers and tablets as a
way to tap into the growing popularity of digital books and
offset slowing sales at its chain of big-box bookstores.

After some initial success in building the Nook business,
sales of the devices plunged during the last holiday shopping
season amid increased competition from technology heavyweights
such as Apple Inc. and Amazon.com Inc.

Lynch Resignation

Then last month, Barnes & Noble announced it would stop
making tablets, and instead partner with a device manufacturer.
It will continue making the black-and-white e-readers and
selling digital books through its mobile applications.

Lynch’s resignation comes less than two weeks after the
company posted a loss in the quarter ended April 30 that was
twice as wide as analysts estimated. Revenue from the Nook unit
sank 34 percent and its loss before interest, taxes,
depreciation and amortization increased to $177 million from $77
million a year earlier.

The retailer initially pursued separating its digital and
retail divisions because it said investors had undervalued the
success of the Nook. Last year, it created the subsidiary Nook
Media, which includes the Nook and college bookstore units, and
received investments from Microsoft and Pearson Plc.

Revive Business

With the decline in Nook sales last year, the strategy of
spinning off Nook Media into its own company shifted to how and
if the business could be revived, Tinker said. Then in February
Riggio announced that he wanted to buy the chain’s retail stores
and website.

If that plan goes through it would leave Nook Media as a
public company, which would raise more unanswered questions,
Tinker said. The answer may be Microsoft because it’s already
invested $300 million, Tinker said. Microsoft’s spending goes
further than that as it also pledged $305 million in additional
payments over five years to help Nook expand overseas.

“It all comes down to what Microsoft’s real intentions
are,” Tinker said.

Under the changes yesterday, Mitchell Klipper, head of the
company’s retail unit, will also report to Riggio. Allen
Lindstrom was promoted from corporate controller to chief
financial officer and Kanuj Malhotra, vice president of
corporate development, is now CFO of Nook Media.